The 123s of Current NC Lien Law: Issues for Owners

November 18, 2010

Last week, we talked about the ABCs of liens for contractors, subcontractors, and design professionals. For every yin, there is a yang. Today we’ll talk about the 123’s of how to handle a lien claim if you are the Owner of the property.

An Owner can always “Bond off” a lien

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If you are the owner of the property, you may not have been aware that subcontractors were not being paid, if lien waivers were not being submitted or were fraudulently executed by the general contractor. Being served with a Notice of Claim of Lien on Funds and/or a Claim of Lien on Real Property can literally stop work on a project. Many construction deeds of trust and similar bank financing require owners to keep the property free from liens or other claims on title.

If you are the Owner faced with a Lien on your property, what can you do?

Rule #1: Never pay “over” a lien. Even if you owe the contractor $80,000, and the subcontractor’s lien is for $5,000, do not think you can set aside $5,000 for the subcontractor (to be worked out later) and pay the contractor $75,000.

Rule #2: Consider your options carefully:

Option 1: Finish the project without any additional payment to the contractor. Pay for a replacement contractor to finish, offset those payments, pay lien claimants from remaining funds.

Option 2: Issue a joint check payable to the lien claimant and the contractor.

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Melissa Dewey Brumback

My name is Melissa Dewey Brumback, and I represent architects, engineers, designers, and other construction professionals in construction disputes throughout North Carolina. I am a partner at Ragsdale Liggett PLLC, where, in addition to my work for A/E/C professionals, I also handle complex commercial and business litigation.

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Statutes and case law vary from jurisdiction to jurisdiction. Information presented here may not be applicable to any individual situation. You should consult a licensed attorney in your jurisdiction for legal advice relating to your specific situation.

The opinions expressed herein are those of the author and not of Ragsdale Liggett PLLC.